Mumbai: Banks are expected to post a nearly 60% fall in treasury income for the July-September quarter from a year earlier due to a sharp increase in government bond yields.
Analysts at Jefferies estimate aggregate treasury gains in the fiscal second quarter to be ₹5,500 crore, down 58% from ₹13,100 crore a year earlier. Sequentially, this income is expected to be 23% lower compared with ₹7,100 crore in the June quarter.
The benchmark 10-year government bond yield rose about 44 basis points in the past quarter, ending September at around 7.19%, compared with roughly 6.75% three months prior. Five-year yields climbed by an even sharper 47 bps.
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Bankers said the projection of a sharp YoY decline in treasury income also reflected a high base, as lenders had booked sizeable gains on their bond portfolios in the second quarter of last fiscal year. "Unless yields soften from current levels, treasury income is unlikely to provide the kind of earnings support that we saw last year. Profit growth over the next few quarters will increasingly have to come from core lending income, fee income and contained credit costs," said a senior treasury official at a private sector bank.
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The impact is expected to be more pronounced for public sector banks, which typically have larger portfolios of government securities and had benefited from stronger treasury gains when bond yields softened in earlier quarters.
